Friday’s data on the second estimate of USA gross domestic product showed that growth in the second quarter for the world’s largest economy was slightly lower than previously thought.
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Treasury investors took Federal Reserve Chairwoman Janet Yellen’s case for a rate rise with a grain of salt Friday, sending yields in two directions. Now she’s giving no time reference.
Later, the dollar fluctuated narrowly around ¥100.50 as players awaited for Yellen’s speech at the annual symposium in Wyoming.
There were positive elements in the report though, said currency strategist Vassili Serebriakov of Credit Agricole in NY.
“ANALYST TAKE: “(Yellen’s speech) is the big event that the markets anticipated, and it has the potential to create waves within the calmness that has prevailed throughout this month”, said Margaret Yang, market analyst at CMC Markets Singapore. Low interest rates made it easier for businesses to borrow money and hire new workers.
Its view is key because its BBB low rating for Portugal is now the only one high enough to keep Portugal’s sovereign bonds in the European Central Bank’s bond-buying programme. The yield was 1.58 percent late Thursday. Yellen is to address the gathering on Friday. But since then, global economic pressures, financial market turmoil and a brief slump in the USA job market have kept the Fed on the sidelines.
All 10 major S&P 500 sectors were higher.
Even though economic growth has only averaged about 1% this year, Yellen sees the glass half full.
The Fed will be in a position to hike rates when the market will give the green light.
“While economic growth has not been rapid, it has been sufficient to generate further improvement in the labor market”, said Yellen.
That raised expectations for an increase in the benchmark federal funds rate before the end of the year, and as early as the Fed’s next policy meeting in September.
On Thursday, several policymakers, including San Francisco Fed President John Williams and Kansas City Fed President Esther George, defended the need to raise rates, albeit gradually, to keep the US economy from overheating.
“Yellen succeeded in leaving the door open to nearly anything”, says Kathy Jones, chief fixed income strategist at Charles Schwab.
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The call to raise rates stands in stark contrast to the likely next moves from many other global central banks whose representatives are meeting here, including policymakers at the central banks for Europe and Japan, where prolonged economic weakness has all but ruled out any near-term contemplation of tighter monetary policy.
